"Sect, Subsidy and Sacrifice: An Economist's View of
Ultra-Orthodox Jews"
BY: ELI BERMAN
Boston University
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=141977
Paper ID: NBER Working Paper No. 6715
Date: September 1998
Contact: ELI BERMAN
Email: Mailto:eli at bu.edu
Postal: Boston University
270 Bay State Rd
Boston, MA 02215 USA
Phone: (617)353-4396
Fax: (617)353-4449
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ABSTRACT:
The Israeli Ultra-Orthodox population doubles each seventeen
years. With 60% of prime-aged males attending Yeshiva rather
than working, that community is rapidly outgrowing its
resources. Why do fathers with families in poverty choose
Yeshiva over work? Draft deferments subsidize Yeshiva
attendance, yet attendance typically continues long after they
are draft exempt. I explain this puzzle with a club good model
in which Yeshiva attendance signals commitment to the community,
which acts as an extremely efficient and generous
mutual-insurance club. Subsidizing membership in a club with
sacrifice as an entry requirement induces increased sacrifice,
compounding the distortion and dissipating the subsidy. Policies
treating members and potential entrants equally are Pareto
improving. The analysis may generalize to radical Islamic sects
and other "fundamentalist" groups. These also practice mutual
insurance and also seem to respond to incursion of markets by
increasing the stringency of prohibitions, which may explain
their high fertility rates.
JEL Classification: H2, I3, J1, J2, N0, O1, Z1